Child benefit payments can help you cope with the ever-rising cost of raising kids, and you may be putting your state pension at risk by not claiming it.
The government pays child benefit to parents or other people responsible for bringing up a child, such as grandparents or foster carers.
Claiming the benefit can give a “big boost to your family budget”, said MoneyHelper. This can be especially helpful as data shows the cost of raising a child to adulthood has reached nearly £160,000, according to the Child Poverty Action Group.
Yet research by Policy in Practice suggests more than 750,000 families are missing out on regular child benefit payments.
Child benefit payments explained
Child benefit is the government’s way of “acknowledging the costs involved in raising a child”, said MoneySavingExpert. You might use it to pay for clothes, food, pocket money or birthday and Christmas gifts, the financial website suggested.
It is paid monthly to anyone responsible for children under the age of 16, or under 20 if they stay in certain full-time education or unpaid training.
Child benefit is currently worth £24 a week for the first child and £15.90 a week for any additional children.
It also applies for multiple births, explained the Daily Mirror, “so if you have twins born minutes apart then you will get different amounts for them.”
You can make a claim on the Gov.uk website or via the post as soon as you have registered the birth of your child.
It can take four months to process a new child benefit claim, said The Sun. However, you can get payments backdated by up to three months so you can recoup some of the lost money.
Either way, the paper added, “it’s worth starting the application process as soon as you can” so you can boost your income and pay for all those nappies.
Watch out for the high income child benefit charge
You can claim the full amount if you or your partner earn £50,000 a year or under.
However, if you have a salary of over £50,000 a year, added the Daily Mirror, “then claiming child benefit is not as simple”.
You will still get the full amount but you will have to pay some of it back in what is known as the high-income child benefit charge. A parent claiming child benefit and earning above £50,000 has to pay back 1% of the money for every £100 earned above £50,000.
So, if you earn £55,000 a year, you’ll pay back 50% and those who earn £60,000 or more have to repay everything. This means if you and your partner both earn £50,000 – so £100,000 annually – then you will not have to pay it back, added the Mirror, but if one of you then starts earning above £50,000, you will.
The earnings threshold includes all income, The Times Money Mentor highlighted. If you have a salary of £40,000, but also a bonus at work, rental income, or interest on savings, it could push you above £50,000.
The threshold at which you start paying the higher rate of income tax is currently £50,271 but the child benefit high-income threshold is £50,000, “meaning even basic-rate taxpayers can pay the charge, despite it being introduced to target high earners”.
You need to pay the charge through a self-assessment tax return and could be fined up to 30% on top of what you owe if you fail to comply.
Critics say communication and publicity from the government about the tax charge has been poor, added The Money Edit, meaning many are “unaware they were supposed to pay the charge”.
If your salary were to drop below £60,000, MoneySaving Expert founder Martin Lewis said in his podcast, you would be entitled for payments again, albeit with some deductions.
Why you should claim child benefit
Even if you don’t think you’ll be entitled to anything because you or your partner earn over the £50,000 tax-free limit, it’s still worth claiming, said MoneyHelper.
Failing to take the money “can be a very costly mistake”, said THB Chartered Accountants, as you could be putting your state pension at risk.
You need 35 full years of National Insurance (NI) contributions to qualify for the full single-tier state pension.
This can become an issue if one parent quits work to stay home to look after the kids or doesn’t earn enough to make NI contributions and their spouse earns above £50,000. The parent who is staying at home and not earning will not be making any NI contributions, the accountancy firm added. “This can, in the long run, affect their entitlement to the full state pension.”
If they register for child benefit, they will automatically receive Class 3 NI credits as long as one child is under the age of 12. “This effectively enables them to continue building up their state pension entitlement.”
The parent earning more than £60,000 will still need to pay the money back through a self-assessment form, but “if the price of not claiming is a major hit to your pension, that’s surely a small price to pay”.
The government announced in April 2023 that it wants to address the issue of people missing out on state pension entitlement, promising to “ensure that parents who have not claimed child benefit are not disadvantaged when they start claiming their state pension”.
It intends to introduce legislation to “allow eligible individuals to retrospectively” claim National Insurance credits.
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Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FT Adviser, This Is Money, the Mail on Sunday and MoneyWeek. This article is based on information first published on The Week’s sister site, The Money Edit.